The most well-known cryptocurrency and largest in terms of market capitalization is bitcoin. But to lower overall risk, a well-balanced portfolio will contain a variety of different coins. Let’s examine a few of them.
Payment Coins
It’s difficult to find new coins these days that focus solely on payments. However, when cryptocurrencies first emerged, the majority of projects were mechanisms for value transfer. The most well-known example is Bitcoin, but there are many other cryptocurrencies including Litecoin (LTC), Ripple (XRP), and Bitcoin Cash (BCH). Prior to Ethereum and the invention of smart contracts, these coins were the initial generation of cryptocurrencies.
Stablecoins
A stablecoin makes an effort to follow an underlying asset, like fiat money or precious metal. For instance, BUSD pegs the US dollar with reserves that are set at a 1:1 ratio. The similar approach is used by PAX Gold (PAXG), except the coin is linked to the cost of one fine troy ounce of gold that is kept in reserves. Stablecoins live up to their name and provide stability, even though they may not always yield high returns.
Since the crypto market is unstable, it helps to have investments in your portfolio that maintain their worth.
Security Tokens
A security token can stand in for a variety of items, just like conventional securities. It could be ownership in a business, a bond issued for a particular undertaking, or even voting rights. Securities now essentially fall under the same laws as other financial instruments because they have been digitalized and placed on the blockchain. Because of this, security tokens are under the purview of regional regulators and must go through a legal procedure before being issued.
Utility tokens
The key to a service or item is a utility token. For instance, utility tokens like BNB and ETH both have them. You can use them, among other things, to pay transaction costs when working with decentralized applications (DApps). In order to raise money through a coin offering, several projects create their own utility tokens.
The value of the utility should, in theory, be directly proportional to the value of the token.
Governance Tokens
You can gain voting rights and even a cut of the profits by owning a governance token. These tokens are most likely to be found on platforms for decentralized finance (DeFi), such as PancakeSwap, Uniswap, or SushiSwap. A governance token’s value is closely correlated with the success of the underlying project, much like utility tokens are.
